Megaupload says U.S. government lied to get search warrant

The U.S. government lied to gain access to Virginia-based computer servers used by Megaupload.com, the website claimed in a motion submitted to a federal court on Wednesday. The accusation is only the latest in a line of alleged missteps by law enforcement in the case against Megaupload, which is considered to be the largest copyright-infringement case in U.S. history.

A recently unsealed search warrant shows that the U.S. Department of Justice asked Megaupload in June 2010 to retain certain files – 39 copies of copyrighted motion pictures – on its servers, which were housed by hosting company Carpathia, for an investigation. By November 2011, 36 of those files were still on Megaupload’s servers, according to the DOJ. The government later seized the servers from Carpathia.

What the DOJ did not tell Megaupload, according to the website’s court filing, is that the investigation was actually against Megaupload, itself, and that the government then used Megaupload’s retention of those files as the primary proof that the company was knowingly harboring copyrighted content illegally.

By all indications, the Government tapped Carpathia to convey the June 24, 2010 warrant to Megaupload, thereby planting what the Government would later claim, for purposes of this case, amounted to criminal knowledge that Megaupload was hosting infringing files, while simultaneously lulling Megaupload into thinking it was not a target of its ongoing investigation (which the Government dubbed its ‘Mega Conspiracy’ investigation) – and, what is worse, affirmatively leading Megaupload to understand from the warrant’s sealing order and Carpathia’s representations that Megaupload should take no action with respect to the infringing files lest it tip off the ostensible targets. In sum, the Government came to paint as criminal the very course of conduct by Megaupload that the Government had induced in requesting good-faith cooperation with an investigation that was to remain secret. Most incredibly of all, however, the Government then came before this Court, ex parte, with a selective, distorted account whereby the Government omitted mention of facts – well known to the Government – indicating that Megaupload was of an innocent state of mind in cooperating with what it was told was an ongoing, secret investigation of the infringing files at issue.

Megaupload asserts that the warrant was “defective,” and that the “resulting search and seizure are unlawful” because the DOJ was “dishonest or reckless” in preparing the affidavit to obtain the warrant.

The unsealing of the warrant came as a result of a motion filed by the Electronic Frontier Foundation on behalf of Megaupload user Kyle Goodwin, who is attempting to retrieve personal files stored on the Megaupload servers seized by the Justice Department, which repeatedly fought to keep the documents secret.

Megaupload founder Kim Dotcom, 38, was arrested in January 2012 at his home in Aukland, New Zealand, by local authorities. A New Zealand judge later ruled that the warrants police used to search Dotcom’s home were invalid, and Prime Minister John Key issued a personal apology to Dotcom for inappropriate surveillance of Dotcom’s home.

The U.S. government has charged Dotcom and other Megaupload executives with conspiracy to commit racketeering, conspiracy to commit copyright infringement, conspiracy to commit money laundering, copyright infringement, and wire fraud. U.S. prosecutors claim Megaupload generated more than $175 million in illegal funds through the unlawful distribution of copyrighted movies, software, and music.

Dotcom, who remains free in New Zealand, faces up to 20 years in prison for each of the racketeering and money-laundering charges. An extradition hearing is scheduled for March.

In the mean time, Dotcom has plans to launch a new service, called Mega, on January 20, the anniversary of the DOJ’s seizure of the Megaupload domains.